Exploring Alternative Sources of Finance for MSMEs
The Small Business Association is fully aware that access to financing in the region has been one of the major impediments to growth for small businesses. As a result, the association has lobbied and encouraged policymakers to consider the provision of grants and stimulus support to firms, especially in this COVID-19 environment.
However, the association believes that traditional forms of financing can no longer sustain the sector going forward and alternative sources of funding solutions must be explored. Therefore, the association recently held a webinar entitled “Developing a Framework for Alternative Financing for MSMEs”, which sought to help members understand what these alternative financial solutions would look like.
Financial Advisory Director of Deloitte and presenter, Mr. Raymond Haynes, defined alternative financing as forms of finance that were outside the traditional finance system of banking. He further stated that these forms of financing generally fell into three main brackets, namely: equity, debt and award.
In his presentation, he gave a brief overview of the following alternative finance solutions:
- Equity Financing – which was defined as the process of raising capital through the sale of shares or stock of the company.
- Angel Investing – where a high-net-worth individual or group provides capital in exchange for ownership equity.
- Crowdfunding – where funding is obtained from contributions made by a large group of people and
- Peer – to – Peer Lending – which is a form of crowdfunding that is typically debt-based but may also be equity based and allows one person or many to lend money directly to those who need it.
Mr. Haynes concluded the discussion by highlighting the key elements needed for alternative finance framework development and developing the capital market in this area, including:
- The ability to create and use the technology and platforms to source and give financing
- The creation of satisfactory legislation to give protection for both investors and borrowers in the financing process including inter alia having penalties for scammers, and
- Education and awareness of these alternative solutions and their pros and cons to encourage wider acceptance and use.
To watch the full video, click the following link: https://www.facebook.com/sbabarbados/videos/2006698616152269